BPO expansion to push demand for office space

MANILA, Philippines - Demand for office space in the country is expected to hit a fresh record high this year, driven by the continuous expansion of business process outsourcing (BPO) firms, a property research firm said.

Demand is forecast to reach 400,000 square meters (sqm) of new office space, particularly for BPO operations, said Shiela Lobien, director and head of project leasing of Jones Lang Lasalle Leechiu (JLLL).

“It is a record high. For the past five years, it is only 300,000 sqm every year and last year we saw 360,000 sqm and it is a jump already,” Lobien said.

The global property consultancy firm said foreign firms are continuously expanding in the Philippines given its competitiveness. As of last year, there are around 250 contact centers in the country.

“Philippine talent still one of the best in the world. As long as we can produce good talent, companies will continue to come to the Philippines,” said Donald R. Felbaum, managing director of business development firm Optel and a board of director of the American Chamber of Commerce of the Philippines.

The labor cost in the Philippines is competitive compared with BPO giant India, Felbaum said, adding that local property firms are producing new office space in good locations.

For 2011 to 2013, JLLL earlier said 400,000 to 500,000 sqm of office space will be built annually in Metro Manila business districts in anticipation of the sustained influx of multinational firms.

Specifically, Lobien said the sprawling Bonifacio Global City in Taguig will host the bulk of new buildings that will be completed next year.

“In Fort Bonifacio, there are a lot of buildings coming up especially for next year. New stocks are coming in that area,” Lobien said.

For instance, the 28-story Net Lima of the Net Group, will offer around 55,000 sqm of gross leasing space. It is located adjacent to the future headquarters of the Philippine Stock Exchange and Shangri-La at The Fort that is already under construction, and several banks.

Lobien said property firms that want to ride the BPO wave should start building new office space.

By 2015, supply will decline while demand continues to pick up, resulting in higher rental costs, Lobien said.

The BPO sector targets $13 billion in revenues this year, from $10.9 billion last year, data from the Business Processing Association of the Philippines showed.

Global demand for BPO services is projected to double in the next few years, with revenues expected to reach $25 billion by 2016.